Gladwell, the underground economy and NB’s fiscal gap

I recently heard Malcolm Gladwell ruminating on why the Americas are so good at paying their taxes. According to him, they have the highest tax paying rate (least cheating) among advanced economies and one of the most lax enforcement systems. He only mentioned Canada in passing but we are apparently well behind the Americans.

His conclusion is that Americans pay their taxes because they believe in the value of public services – that they are getting value for their taxes. He didn’t base it on some kind of morality (at least int he conversation I heard).

Anyway, I thought about that conversation when I read today that New Brunswick has one of the largest underground economy in Canada – estimated at $816 million per year – heavily influenced by residential construction. The last study I saw on this back in the 1990s speculated that the EI system was a major influence on the underground economy.

But I come back to Gladwell. Why would people in New Brunswick want to brazenly flout the law and avoid paying their fair share of taxes?

As we look to cut hundreds of millions from public spending, we could use the $100+ million in tax revenue…..